Cambodia: CCFTA to boost agricultural commodity exports
With zero tariff, exports of agricultural commodities like cashew nut, banana, mango, longan and cassava starch to the Chinese market are expected to soar, says WB report
The Cambodia-China Free Trade Agreement (CCFTA) is expected to boost agricultural commodity exports, according to a World Bank report.
The objective of CCFTA and RCEP is to increase the trade in goods (and services) by reducing and eliminating tariffs and non-tariff barriers.
The CCFTA covers more than 10,800 tariff lines for Cambodia and about 8,500 tariff lines for China. “The CCFTA goes beyond what was offered under the ASEAN-China FTA, covering an additional 340 tariff lines (4 percent of the total), which includes mostly chapters 1 to 10 of Cambodia’s ASEAN Harmonized Tariff Nomenclature, ranging from live animals/animal products to meat, fish, and cereals. Since January 1, 2022, about 98 percent of China’s tariff lines have immediately gone to zero tariff rates. Of the 340 commodities, 95 percent are untaxed,” the report pointed out.
The Chinese tariffs on Cambodia’s exports of cashew nut, banana, mango, longan, and cassava starch decreased from 20 percent to zero percent, thanks to CCFTA. The Chinese tariff on pepper is reduced from 20 percent to zero percent after 10 years. With zero tariff, exports of these agricultural commodities to the Chinese market will increase, the study observed.
“The Chinese tariffs on rice, corn, refined sugar, unmanufactured tobacco, and natural rubber under the CCFTA, however, remain at 65 percent, 20 percent, 50 percent, 10 percent, and 20 percent, respectively,” it pointed out.
Even before the CCFTA took effect, exports of Cambodia’s agricultural commodities – rice, cassava, and banana – increased quickly.
A study by the World Bank Group found that all participating countries benefit from the RCEP, although gains are not distributed equally.
According to the report, Vietnam, Malaysia, and Cambodia are among the countries that benefit most under the “full” scenario, with reductions in tariffs, non-tariff measures, trade costs, and productivity increases. “In most countries, there is a significant impact when trade costs are reduced. For Japan, most gains are associated with a fall in tariffs, in contrast to the rest of the countries, where they fall in tariffs reports very slight results, or even a negative impact, as is the case of Cambodia.
Meanwhile, the report also pointed out that the rising oil prices were hurting exports of agricultural commodities.
Unlike electronics, garments, travel goods, and footwear, agricultural commodities are heavy and relatively cheap cargo, which are being affected disproportionally by rising ocean freight costs due to supply chain disruptions (shortage of empty containers), caused by the pandemic, and the oil price shock, triggered by the war in Ukraine, it said. Quoting figures from the Cambodia Rice Federation, the report indicated that the trucking costs to the Kingdom’s main ports recently increased by 10 to 20 percent.
“The freight costs are now unpredictable, depending on the volatility of oil prices. Long-distance freight has been particularly hard hit. Despite the end of the trade safeguard measures imposed by the EU on Cambodian
rice in January, saving rice exporters €125 per metric tonne, the high ocean freight rates, which have increased several times in
the past few years, will continue to dampen Cambodia’s rice exports to the EU market,” it added.